BEHIND THE SCENES HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

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MAX SIZE = N/A MIN SIZE = 30mm exclusion zone, white area to be kept clear DO NOT PRINT BOX contents 3 EXECUTIVE SUMMARY 5 INTRODUCTION: TWO STEPS FORWARD, BUT HOW MANY STEPS BACK? For over 25exclusion years zone, white as area a to nonprofitbe kept clear DO NOT PRINT organization, BOX

MAX SIZE = N/A 6 LAUNDERING MACHINES: EIA has pioneered theMIN SIZE use = 30mm of undercover SCHWEIGHOFER’S ONGOING DEPOT PROBLEM investigations to expose environmental crime 8 SCHWEIGHOFER’S DEPOT SUPPLIERS around the world. Intelligence reports, OF NATIONAL PARK WOOD documentary evidence, campaigning expertise and an international advocacy network enable 9 Frasinul: Friends in Low Places EIA to achieve far-reaching environmental 10 TROUBLE IN THE PARKS protection by spurring changes in market 12 RHETORIC VERSUS ACTION: demand, government policy and enforcement SCHWEIGHOFER’S FAILURE TO ENACT REAL REFORMS related to global trade in wildlife and 12 KRONOSPAN AND EGGER environmental products. 13 Kronospan’s Risky Log Sourcing 13 Egger’s Unknown Supply Chains ACKNOWLEDGEMENT EIA would like to thank the following funders for their support: 14 JAPANESE BUYERS: STILL BRINGING THE CASH The Tilia Fund 15 CONCLUSION Good Energies Foundation Weeden Foundation 15 RECOMMENDATIONS The Cox Fund 16 REFERENCES © Environmental Investigation Agency, Inc. 2018. All images © Environmental Investigation Agency, Inc. unless SIDEBARS AND GRAPHICS otherwise stated.

4 LOCATIONS OF SCHWEIGHOFER’S SUPPLIER DEPOTS No part of this publication may be reproduced in any form or by 6 THE ROLE OF LOG DEPOTS IN SCHWEIGHOFER’S any means without permission in writing from thre Environmental Investigation Agency, Inc. The contents of this report do not ROMANIAN SUPPLY CHAINS necessarily reflect the views and opinions of EIA’s funders, EIA is 8 18 MONTHS OF NATIONAL PARK HARVESTING BY solely and entirely responsible for the contents of this report. SCHWEIGHOFER SUPPLIERS, JAN 2017-JUNE 2018 Cover: EIA 9 HOW LOGS FROM RODNA MOUNTAINS NATIONAL PARK GET TO SCHWEIGHOFER 9 HOW LOGS FROM CALIMANI NATIONAL PARK GET TO SCHWEIGHOFER 11 LOGS HARVESTED IN NATIONAL PARKS IN ROMANIA IN 2017 14 SCHWEIGHOFER EXPORTS FROM ROMANIA TO JAPAN FROM 2015 TO 2017

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Executive Summary EIA

new investigation by the Environmental Investigation transparency tool – but its impact has been limited both Agency (EIA) has found that the Austrian timber giant by subsequent government actions and by the prevalence AHolzindustrie Schweighofer (Schweighofer) is still of depots that do not trace the origin of logs they buy and sourcing timber from Romania’s national parks, despite sell. 1 over five years of public pledges not to. Schweighofer still Depot sourcing and the lack of traceability back to the buys nearly half of its Romanian log purchases from third forest stand are problems for all major foreign buyers in party log yards. For this wood it lacks traceability back to Romania. The other major Austrian companies in Romania, the forest origin, and is unable to exclude timber from Kronospan and Egger, have even longer supply chains, illegal sources, or from national parks or other protected and even more difficulties to know the legal origin of their areas. wood supplies. However, Schweighofer’s role as one of Romania’s Carpathian Mountains once housed the Romania’s largest log buyers means that its purchasing majority of the remaining old growth forests in Europe, decisions still have the greatest impact on forest with the continent’s largest populations of bears, wolves, governance in the country. Schweighofer’s continued and lynx. Recent estimates indicate that as many as extensive sourcing from depots brings into question two-thirds of these forests have been lost in just the past the company’s commitment to legal timber sourcing. decade.2 The extensive no-questions-asked sourcing by Schweighofer and other foreign buyers continue to profit large foreign and domestic wood processors, of which from countries with poor forest governance. Schweighofer is the largest, for logs and biomass to feed foreign demand has played a significant role in the decline of these precious forests. EIA’s investigation has determined that Schweighofer’s log suppliers have transported over 35,000 m3 of timber from just two national parks in the 18 months from January 2017 to June 2018. One of Schweighofer’s largest Romanian suppliers of wood is called Frasinul. Frasinul cuts wood in numerous sites in national parks and operates numerous log yards nearby, from which it sells logs to Schweighofer. Frasinul has a history of legal troubles; its CEO has been under investigation by Romania’s anti- corruption authorities since 2014. EIA visited active and recent logging sites in forests Log depot in Romania EIA identified using data from Romania’s new Forest Inspector website and other online sources. Forest Inspector provides real-time information to the public about all timber transports in Romania. It is a ground-breaking

3 BEHIND THE SCENES: HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

In May 2018, Romanian police raided Schweighofer facilities and suppliers as part of a years-long investigation EIA’s investigation has determined that into the company for illegal logging, tax evasion, and links Schweighofer’s log suppliers have transported to organized crime. The government puts the damage to the state at 25 million euro.3 over 35,000 m3 of timber from just two While many European buyers have stopped purchasing national parks in the 18 months from January products from Schweighofer, Japanese buyers, who make up around half of Schweighofer’s exports, continue to 2017 to June 2018 fuel illegal logging through their ongoing purchases from Schweighofer. Schweighofer lumber competes directly with domestic Japanese cypress in Japan’s house-building government to crack down on illegal logging and fully market, but Schweighofer’s imported lumber is cheaper, in involve its citizens in the transparent governance of its part because of illegal logging. precious forests. Foreign companies operating in Romania have a responsibility to enact real traceability for all Romania’s forests have suffered over a decade of their wood purchases, and to stop contributing to the mismanagement and neglect to feed foreign demand for destruction of Europe’s last great forests. cheap wood. The time has come for the Romanian

O V A K I A R A I N L U K E Location of Schweighofer Supplier Depots H U N G A LEGEND R Y M Schweighofer Sawmill BOTOSANI #9 National Park MARAMURES HS Rădăuți O SATU-MARE Baia Mare City Rodna SUCEAVA L Capital

D COUNTY BISTRITA-NASAUD IASI SALAJ Calimani 1 5 12 16 38 O Ceahlau NEAMT Number of Schweighofer Supplier BIHOR CLUJ Log Depots Per County BicazuluiCheile R Cluj-Napoca V

Bacău MURES A O HARGHITA VASLUI BACAU ARAD M ALBA A N COVASNA I A HS Sebeș SIBIU Timișoara HUNEDOARA BRASOV HS Reci VRANCEA GALATI TIMIS Piatra Craiului CARAS-SEVERIN Retezat S Deleul Cozia BUZAU MacinuluiMuntii Jiului Buila

Semenic PRAHOVA BRAILA E VALCEA ARGES TULCEA Domogled GORJ Cheile Nerei R DAMBOVITA ILFOV IALOMITA B MEHEDINTI Bucharest OLT CALARASI I Constanța DOLJ GIURGIU CONSTANTA A TELEORMAN A BLACK B U R I L G A SEA

Figure 1. Schweighofer’s network of depot suppliers EIA 4 exclusion zone, white area to be kept clear DO NOT PRINT BOX

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INTRODUCTION: Two steps forward, but how many steps back? Calimani National Park EIA

n 2014, undercover investigators from the Environmental These actions have created a moment of respite for Investigation Agency (EIA) met with officials from Romania’s forests, but the lasting impact remains IHolzindustrie Schweighofer (Schweighofer), an Austrian uncertain. The Romanian government’s investigation company which is the largest wood processor in Romania. remains in progress, and prosecutors have not yet filed EIA wanted to understand how the widespread illegal formal charges. Schweighofer’s imports of timber into logging that local Romanian media and NGOs had Romania have increased significantly to 1.6 million m3, documented for years could continue unabated, and where much of this from neighboring countries with high levels the vast quantities of illegal wood ended up. The answer of corruption, including Ukraine and Belarus, and from was simple. When EIA offered to supply Schweighofer with countries with large areas of sensitive forest habitats illegal logs, company officials replied, “no problem” – in such as Slovakia.9 Since 2016, Romania’s government has two separate in-person meetings and also over email. reversed course on transparency, and has removed key 10 The release of EIA’s video in early 2015 set off a sequence data from the Forest Inspector website and mobile app. In Romania, Schweighofer has sold off much of its forest of events that have upended the Romanian forest sector. In 11 June 2015, Romanian officials inspected Schweighofer mills lands and most of its own log yards, thereby shifting and suppliers, gathering evidence which led to a three-year responsibility for legal and sustainable harvesting more investigation by Romania’s anti-organized crime police.4 In and more to third-party log suppliers. 2017, Schweighofer lost its FSC certification.5 The company A 2005 scientific survey estimated that Romania contained announced a series of changes to its sourcing policies two-thirds of Europe’s last remaining virgin forests, totaling and has dropped its purchases of Romanian logs from 2.3 around 300,000 hectares. Recent analyses are still ongoing, million cubic meters in 2013 to 1.2 million m3 in 2017.6 In but forecasts are pessimistic. Researchers estimate that 2016, the Romanian government launched a public, online the 2018 total will be closer to 100,000 hectares.12 Illegal electronic tracking system for wood transports, the Forest and uncontrolled logging has played a large part in these Inspector, setting a new precedent for public transparency.7 declines – fueled by a no-questions-asked demand for In May 2018, Romania’s anti-organized crime police raided timber and biomass in Europe and abroad. The lack of Schweighofer mills and suppliers, accusing Schweighofer traceability within Romania’s timber sector means that employees of taking part in criminal networks to obtain foreign buyers continue to unknowingly fuel the ongoing illegal timber, and of defrauding the Romanian state of at destruction of Europe’s last great forests. least 25 million euro.8 EIA 5 BEHIND THE SCENES: HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

Laundering Machines: Schweighofer’s ongoing depot problem EIA

chweighofer claims that all timber entering its mills has legal origin,13 thanks to its recently introduced Sdue diligence procedures.14 The first step in due THE ROLE OF LOG DEPOTS IN SCHWEIGHOFER'S diligence is information gathering in order to assess what ROMANIAN SUPPLY CHAINS risks are associated with a specific supply chain.15 For nearly half of Schweighofer’s Romanian supply chain, namely the logs that it buys from third-party log depots, PRODUCTION FORESTS NATIONAL PARKS & ILLEGAL LOGGING the company has little control or knowledge over where OTHER PROTECTED AREAS and how these logs are harvested. This large gap in its supply chain makes it impossible for Schweighofer to guarantee legality, much less sustainability, of sourcing. It also means that Schweighofer continues to receive logs cut in Romania’s national parks. ? ? ? In Romania, hundreds of log yards and sawmills in mountain communities collect logs from nearby forests. These depots sort the logs according to species and quality, sometimes cutting them into shorter lengths, and sell them to other depots, sawmills, or exporters. Many depots also function as small sawmills, providing lumber for local construction or furniture manufacturing. While LOG DEPOT depots provide a useful economic function, their lack of traceability also removes any information about the origin of the logs they sell. Under Romanian law, the permit for the “primary transport” of logs or wood chips from a forest must include the number of the harvest authorization permit.16 55-60% 40-45% However, this harvest permit number is not included under permits for logs coming from a depot, known as “secondary transports.”18 In many cases, depots serve as laundering machines, allowing illegally cut logs to enter the national timber market. Depots buy logs from many different sources, including Figure 2. How depot sourcing exposes Schweighofer to EIA directly from forests and from other depots. Logs from a illegal and unsustainable logging 6 exclusion zone, white area to be kept clear DO NOT PRINT BOX

single truck can end up in different piles, and parts of each Schweighofer claims to be a “pioneer” in addressing the pile could be sold to a different buyer. Some logs could be lack of traceability within log depots, through a pilot sold onwards immediately, while others could rest in the program it is testing for tracking logs within one of itsexclusion zone, white area to be kept clear DO NOT PRINT BOX MAX SIZE = N/A depot for weeks. Depots are required by law to record two company-owned depots.23 However, Schweighofer MIN SIZE = 30mm all log purchases and sales in a ledger, which can be already claims that it is confident that the controls carried requested by enforcement authorities.18 However, they out by each of its third-party depot suppliers already are not required to keep track of individual logs – and few guarantee legal and sustainable sourcing.24 if any do. Data obtained by EIA indicates that Schweighofer sources logs from over 250 separate depots all around Romania. EIA estimates that Schweighofer sourced around 40-45% In many cases, depots serve as laundering of the logs it purchased in Romania in the first half of 2018 from these depots. Each of Schweighofer’s depot machines, allowing illegally cut logs to enter suppliers are independent, local companies, with their the national timber market own sourcing practices and standards. EIA and others have noted this problem in Schweighofer’s supply chain since at least 2015.19 The Forest Stewardship Council (FSC) expert panel, in a detailed report that led to The company has made numerous misleading claims the company’s disassociation from Schweighofer, noted, about its ability to trace supply chain – in particular “where purchases are made from intermediaries that pointing to its Timflow GPS tracking system. The company there is a breakdown of the Chain of Custody (CoC) which claims that, “Every truck delivering logs to the company’s prevents Schweighofer from determining the source of 20 saw mills is equipped with a GPS device which proves the timber it buys.” the logs’ exact loading place.”25 While this is true, the Schweighofer itself has long acknowledged that “depots “loading place” for nearly half of these trips is merely a are the weak link in its supply chain.”21 However, instead log depot – bringing Schweighofer no closer to knowing EIA of requiring internal traceability from its depot suppliers, the actual forest origin of the logs (see figure 2). For these the company has sold off the majority of its log depots purchases, Schweighofer remains exposed to logs sourced and all of its forests,22 thereby increasing its dependence from national parks, virgin forests, and illegal logging. on private depots.

SUMAL and Forest Inspector – real transparency of wood transports

Since 2014, Romania requires electronic registration of all wood products transports into its SUMAL database. Using a GPS-enabled smartphone or device, truck drivers must register their journey before they begin driving. Once the truck reaches an area with cell phone service, this transport permit is automatically uploaded to the central SUMAL database.

In 2016, the government upgraded SUMAL, creating a public user interface called Forest Inspector (www.inspectorulpadurii.ro). The Forest Inspector website and mobile app provide real-time information about all timber transports in the country. Romania’s Forest Inspector website, showing timber transport loading points EIA EIA

7 BEHIND THE SCENES: HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

Schweighofer’s depot suppliers of national park wood EIA

chweighofer has claimed that it refuses wood from Romanian national parks since at least S2013.26 Over the past five years, NGOs and the media have exposed numerous cases of wood from national parks arriving at Schweighofer mills.27 After every case, the company has claimed to have reformed its sourcing policies, maintaining that it can now exclude national park wood. EIA’s latest analysis shows that Schweighofer has been breaking its promise until this day. EIA analyzed 18 months of data from the Forest Inspector website to identify over 50 logging sites in two national parks in northern Romania where Schweighofer suppliers regularly source timber (see figure 3). The Forest Inspector website listed individual trucks loading timber within the parks. EIA linked these trucks to nearby depots that supply logs to Schweighofer. In total, since the beginning of 2017, EIA estimates that at least 35,000 m3 of logs were cut from these two national parks and carried to depots supplying to Schweighofer.

Schweighofer has been breaking its promise until this day Figure 3. 18 months of national park harvesting by Schweighofer EIA suppliers, Jan 2017 - June 2018

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Frasinul: Friends in low places

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MAX SIZE = N/A ne of Schweighofer’s largest depot suppliers is the MIN SIZE = 30mm Romanian company Frasinul. Frasinul sells logs to OSchweighofer from four depots located near Rodna and Calimani National Parks. EIA’s investigation confirmed that at least three of these four depots receives logs cut in the nearby parks (see figures 4 and 5). Frasinul’s owner, Traian Larionesi, has a history of legal troubles, and since 2014 Romania’s anti-corruption authority (DNA) has opened two investigations into him and his companies for bribery of local police chiefs to protect his illegal activities.28 In 2017 and 2018, Frasinul maintained active logging operations within both Rodna and Calimani National Parks. According to data obtained from the Forest Inspector, Frasinul trucks transported at least 6,000 m3 of timber out of these Figure 4. Frasinul logging operations in Rodna Mountains EIA parks in the 18 months to June 2018. These trucks carried many if not all of these logs to Frasinul depots near the parks. Schweighofer’s mills in Sebeș and Rădăuți in turn received regular log deliveries from all of these Frasinul depots. Frasinul even received over one million euro of funding from the EU Rural Development Fund for the construction of a logging road inside Rodna National Park – including a road leading into the strictly protected zone inside the park.29 In 2014, the DNA formally opened an investigation into accusations that several high-ranking police officers had EIA harassed and intimidated lower-level police to make them drop charges against Larionesi’s business activities and associates.30 In exchange for this protection, Larionesi is reported to have given these policemen expensive gifts including cars, hunting rifles, and beer.31 Under the second investigation from 2015, the DNA accuses the head of the local Forest Directorate, Gheorghe Ivan, of helping Frasinul win 84 of the 123 forest exploitation contracts in public forests Figure 5. Frasinul logging operations in Calimani EIA auctioned between 2010 and 2012.32 According to sources, both investigations remain ongoing. In addition, Frasinul and Larionesi have been involved in a number of other local criminal cases, many of which have ended with significant fines being levied against the businessman.33 Larionesi’s companies received fines of hundreds of thousands of euro for unregistered logging, for clogging a local waterway for a trout fishery, and for excessive billing for government contracts for snow-clearing.34 In April 2018, Frasinul and one of its sister companies were among eight companies raided by forest police investigating illegal logging in northern Romania, including within Calimani National Park.35 Authorities issued fines totaling over 30,000 euro and confiscated 900 cubic meters of timber.36 Since this raid, local media and a top government official in the Ministry of Water and Forests have stepped up to protect Larionesi, claiming that no wrongdoing was found, and that he is being intimidated.37 Schweighofer’s ongoing purchases from companies such as Frasinul which maintain active logging permits inside national parks cast serious doubts about the company’s Frasinul received EU funding to build a logging road inside EIA EIA commitment to sustainable sourcing. Rodna Mountains National Park

9 BEHIND THE SCENES: HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

trouble in the parks Loading site in Rodna National Park EIA ommercial logging in national parks is widespread then replant with a mix of species in order to restore in Romania. Large areas of Romania’s national parks a healthy balanced ecosystem.40 In many cases, forest are classified as “buffer zones,” in which large-scale experts say this is merely an excuse for cutting healthy C 38 logging is authorized by the Romanian government. EIA trees of many species. At one such site inside a national visits to active logging areas in late 2017 and early 2018 park and logged by a Schweighofer supplier, EIA found indicate that the type and extent of logging practiced diseased trees marked for cutting still standing, and large within Romania’s national parks is highly destructive and un-marked stumps of seemingly healthy trees nearby. To sometimes illegal. extract a small number of trees from a high ridge, loggers EIA’s visits focused on active logging sites in two parks in had cleared three large swathes down the steep hillside. the north of Romania – Rodna Mountains National Park At another site in Rodna Mountains National Park, EIA and Calimani National Park. Much of Rodna Mountains found what appeared to be a thinning operation, however National Park is in private hands, the ownership having with a number of freshly-marked large stumps – indicating been returned to neighboring municipalities in the post- that these trees had not been previously approved by a Communist period. Most of Calimani National Park, in forest official.41 At another fresh logging site one kilometer contrast, is state-owned, and logging is managed by away, none of the dozens of freshly-cut spruce stumps had Romsilva, the state-owned logging company. Logging in all proper markings. In one case, loggers had covered up a national park lands, whether public or private, should follow strict guidelines to ensure the protection of wildlife and to allow for recreational uses such as fishing or hiking.39 Contrary to the spirit of this mandate, and contrary to the wishes of many Romanians, the logging operations carried out in Romania’s national parks differ little from those in production forests outside their boundaries. In a single site in Calimani National Park, a logging company supplying Schweighofer harvested over 4,600 trees – more than in almost any other national park site in the country in 2017. Loggers cut both spruce and beech trees on this site, under a permit for “primary felling” – standard commercial logging. After logging had been completed, the stream below remained clogged with logging wastes. Other active logging sites linked to Schweighofer suppliers in the national parks were classified as “conservation” logging. Conservation logging is intended as selective logging of planted monoculture forests, which foresters Schweighofer supplier loading logs inside Calimani EIA National Park 10 exclusion zone, white area to be kept clear DO NOT PRINT BOX

fresh stump with moss to avoid detection from the road below. The loading site near this logging area

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had no officially registered transports. A Schweighofer MAX SIZE = N/A MIN SIZE = 30mm supplier managed the logging operation in this area, and Schweighofer received at least three truckloads of timber directly from here. EIA documented this case extensively in a December 2017 case study.42 Although large-scale clear cuts are not common in Romania’s national parks, the extensive logging still common in these parks severely degrades the quality of these forests and damages fragile ecosystems that wildlife depends on. In order to preserve the last remaining intact forests, Romanian organizations are therefore demanding to end logging in national parks entirely. Schweighofer has promised for over half a decade to not buy logs cut in national parks. The company’s continued dependence on depot suppliers, however, means that it still promotes these destructive logging practices.

Rhetoric Versus Action: Schweighofer’s Falure to Figure 6. Heat map of logging in Romania’s national parks EIA Enact Real Reforms On May 30, 2018, Romanian anti-mafia police raided 23 lo- The alleged organized criminal EIA cations around Romania linked to Schweighofer, including Schweighofer’ main sawmills. The raid, led by Romania’s syndicate includes Schweighofer, Directorate for the Investigation of Organized Crime and Terrorism (DIICOT), followed a three-year investigation that several public institutions, and other began in June 2015 after EIA first accused Schweighofer of companies suspected of engaging in actively incentivizing illegal logging in Romania. The alleged organized criminal syndicate includes Schweighofer, several “misappropriation of public auctions, public institutions, and other companies suspected of en- gaging in “misappropriation of public auctions, tax evasion, tax evasion, unfair competition, illegal unfair competition, illegal logging and other offenses,” logging and other offenses,” according to DIICOT.43 Separately, Romania’s Competition Council is actively investigating Schweighofer and Egger, in according to DIICOT. a two-year investigation into rigged auctions.44 Over the past three years, Schweighofer has claimed that Romanian authorities consistently checked and approved of its actions, and that it operated completely in line with Romanian laws.45 DIICOT’s recent raid shatters this façade. The government’s press release noted that these criminal activities are suspected “from 2011 to present” – indicat- ing that Schweighofer’s illegal activities have continued since they were first brought to international attention in 2015.46 In addition, Schweighofer’s claimed policy revisions seem to apply only to Romania, whereas the company imports over half of the logs processed in Romania from neighboring countries, including Belarus, Ukraine, and Slovakia.47 Schweighofer’s Timflow GPS tracking system operates only within Romania. Given that just under half of these transports originate not from forests, but from log depots, this means that Schweighofer has GPS tracking back to the forest loading point for only around 20% of all its logs processed in Romanian sawmills. Suspected illegal logging site in Rodna Mountains National Park EIA

EIA

11 BEHIND THE SCENES: HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

KRONOSPAN AND EGGER Beech log delivery to Kronospan EIA

EIA’s evidence indicates that all companies sourcing from covered trucks; 19 carried chips or other wood scraps; third-party depots in Romania operate with same lack of and 30 carried whole logs. The Forest Inspector website traceability as does Schweighofer. EIA conducted a brief indicated that 22 of these log trucks came directly from study to get a view into the raw materials supply chains forest loading sites, while 8 came from depots. 18 were feeding Kronospan and Egger - two of the other largest wood products companies in Romania; both are Austrian, and both have close business links to Schweighofer. EIA conducted stakeouts of the mills of both companies, recording the license plates of every truck entering the mills in a given time period. EIA then searched for these license plate numbers in Romania’s Forest Inspector website, to determine the origin of any trucks delivering wood products. Both Kronospan and Egger produce more highly processed products than Schweighofer. For this reason, both companies process fewer logs than Schweighofer, and fewer of the trucks seen arriving at each mill showed up in the Forest Inspector system. Every shipment of logs or lumber in Romania must register an official transport Mobile chipper inside Rodna Mountains National Park EIA permit – which immediately becomes public on the Forest Inspector website. Drivers must register transports of wood chips and other scraps for first transports – direct from forests – but not if they come from sawmills or log depots.48 Many forest experts see this as a serious loophole, allowing large amounts of biomass to be smuggled out of the forests. In one instance, EIA witnessed loggers feeding a large mobile chipper with whole spruce trees, inside a national park. In this single day, investigators watched the chipper fill four large trucks with wood chips. None of these four trucks were registered in the Forest Inspector system – meaning all four of these transports were completely illegal and untraceable. Kronospan’s risky log sourcing Within a five-hour period, EIA recorded 137 trucks entering Kronospan’s Sebeș factory. Of these, 86 were “Eyes” cut by Kronospan supplier inside a conservation area EIA

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registered as carrying firewood quality logs, while 12 of the log trucks had standard logs. Most of the chip and covered exclusion zone, white area to be kept clear DO NOT PRINT BOX

MAX SIZE = N/A trucks were not registered, but these could have been legal MIN SIZE = 30mm had they originated from a depot or were empty. EIA investigators visited a forest where one of these log trucks supplying Kronospan had originated. This site was a beech forest located within a Natura 2000 conservation site just 30 km from Kronospan’s Sebeș factory; this despite the fact that Kronospan claims it can “ensure that suppliers do not use wood from national parks, natural preserves, virgin forests and other conservation areas.”49 Near the loading site, EIA found an ongoing logging operation in which loggers were cutting a series of seven Chip truck arriving at Kronospan factory EIA so-called “eyes” – small clear-cut circles at regular intervals. Such a logging operation is common in commercial forests, registered in SUMAL. but less so in protected forests, where logging operations EIA also observed six loaded log and chip trucks exiting are required to follow strict standards to ensure protection Schweighofer’s gate and directly entering Egger’s 50 of local flora and fauna. Loggers had turned a stream into neighboring gate. This highlights the position Egger an illegal logging path, and dragged logs for 700 meters holds in the supply chain – the company is dependent down to the loading site in the valley below. on its raw material suppliers to ensure the legality of EIA EIA tracked one of the log trucks seen delivering to its downstream supply chains. As seen above, even a Kronospan over a period of two weeks. During this time, company like Schweighofer can neither trace the actual the truck loaded regularly in two sensitive ecological zones origin, nor ensure the legality, of its log purchases; the not far from Kronospan’s Sebeș factory. These conservation difficulties for Egger are much greater. areas are classified as Natura 2000 sites, meaning that Egger claims that it “sources wood from the regional they are subject to special protections at the European surroundings of its plants,” and that “the strict legal 51 Union level. In some cases, this truck delivered these logs requirements in Europe ensure sustainable forestry directly to Kronospan, while in others it delivered logs to a practice.”53 However, the company’s sourcing nearby depot, which itself is known to supply Kronospan. documentation states that the raw materials for its Kronospan’s website states that the company is concerned Romanian factory come from a total of 10 different with sustainability; claiming it sources its raw materials from countries, chiefly Romania, Ukraine and Belarus.54 It “wood residue from the sawmill industry” – scraps, unused further claims 100% traceability for these products – but and unwanted product that would otherwise be wasted.52 the meaning of this is uncertain given that even suppliers The high number of large logs that EIA observed entering such as its neighbor Schweighofer cannot trace their log Kronospan’s factory on a single day belies this claim. While purchases. many of these logs were classified as “firewood” quality, a large number were high-quality sawlogs. In recent years, Romania has faced a crisis of access to Egger is dependent on its raw material firewood. The cost of firewood has increased significantly, and local communities have struggled to obtain sufficient suppliers to ensure the legality of its supplies to heat their homes through the winter. The EIA appetites of large wood processors like Kronospan for downstream supply chains firewood quality logs has a significant impact on Romania’s mountain communities. Egger’s unknown supply chains Egger is an Austria-based wood products company with factories across Europe. Its Romanian factory in Rădăuți, adjacent to Schweighofer’s sawmill, produces oriented strand board (OSB) and chipboard. Over a span of a few hours, EIA observed 20 trucks entering the factory of Egger in Rădăuți. None of these trucks were registered in the Forest Inspector system. As noted above, if these trucks carried logs or boards, they would need to be registered in the SUMAL government electronic tracking system. If these covered trucks carried wood chips, shipments from forests must be registered in SUMAL; EIA shipments from depots or sawmills are not required to be Truck carrying logs between Schweighofer and Egger factories EIA

13 BEHIND THE SCENES: HOW LOG YARDS HIDE THE DESTRUCTION OF EUROPE’S ANCIENT FORESTS

Japanese buyers: still bringing the cash EIA apan has been the #1 destination for Schweighofer timber for many years. Schweighofer’s Japanese buyers Jinclude most of its largest importers – conglomerates responsible for a large portion of Japan’s imports, including Hanwa, Sumitomo Forestry, Itochu Kenzai, and Sojitz.55 In 2016, Japan enacted its new Clean Wood Act (CWA).56 Japanese importers that registered under the CWA are required to conduct Due Diligence to ensure the avoidance of timber that was illegally or unsustainably harvested.57 In 2016, EIA published a report in Japanese, detailing Schweighofer’s history of illegal sourcing of timber in Romania and from its high-risk neighbor, Ukraine.58 In meetings between EIA and importers, most companies claimed that they were taking these concerns seriously. However, despite Schweighofer’s loss of its FSC certification, none of the companies’ main Japanese buyers have stopped importing from Schweighofer. Schweighofer lumber in new house under construction in EIA Japan Japan has plenty of similar forests as those in Eastern Europe and has strong domestic logging potential. The Over the past three years, many of Schweighofer’s main fact that Schweighofer wood can compete directly with European customers have stopped their purchases.59 domestic timber on such a large scale in Japan speaks to However, the strength of Schweighofer’s Japanese market the undervaluing of timber that Schweighofer gets from and the loyalty of its customers continue to prevent the Romania, Ukraine, Slovakia and neighboring countries. company from establishing real reforms to its sourcing practices.

Figure 7. Schweighofer exports from Romania to Japan from 2015 to 2017 14 exclusion zone, white area to be kept clear DO NOT PRINT BOX

exclusion zone, white area to be kept clear DO NOT PRINT BOX

MAX SIZE = N/A MIN SIZE = 30mm

EIA Conclusion EIA raceability back to the forest stand is the only way Romania’s anti-mafia police have demonstrated their to know if your wood actually comes from legal and commitment to the steady enforcement of laws through Tsustainable sources. Schweighofer and other large their ongoing years-long investigation into the nation’s companies are still unable or unwilling to establish a real largest timber processor. But as long as Japanese, chain of custody back to the forest for a large proportion American, and other foreign buyers continue to buy from of their log purchases in Romania. Romania remains a companies like Schweighofer, real change in company high-risk country for illegal logging. These companies sourcing practices will be limited. urgently need to implement full traceability for all log Ten years ago, scientists estimated that Romania purchases, if they want to comply with EU law and avoid contained two-thirds of all the remaining virgin forests in buying illegal timber. Europe.60 Ongoing studies are showing disturbing declines Romania’s Forest Inspector website and app have in these great forests, with corresponding implications for created a unique example of real-time transparent public some of Europe’s last populations of large carnivores.61 information on forests transports, and have had significant Romania’s forests have suffered over a decade of impacts in reducing illegal transports. However, progress EIA mismanagement and neglect to feed foreign demand has stalled over the past year. Instead of a planned for cheap wood. The time has come for the Romanian expansion of the system, the Romanian government government to fully involve its citizens in the transparent has reduced the functionality and the amount of data governance of its precious forest resources. Foreign made available to the public. Should the government companies operating in Romania have a responsibility to include links between harvesting permits and transports, enact real traceability for all their wood purchases, as a complete the digitization for maps of all forest parcels, first and critical step to ensuring that they stop fueling the and devised forest management plans as previously destruction of Europe’s last great forests. planned, it could make Romania a model for transparent forest governance. Recommendations Schweighofer: • Stop commercial logging in national parks. • Halt all purchases of timber lacking full traceability back • Inspect and investigate imports from non-EU countries to forest of origin – not just the loading point. into Romania for compliance with EUTR due diligence Kronospan and Egger: and traceability requirements. • Urgently reassess their supply chains and establish a Japanese government and companies: time-bound path towards full traceability by 2020 at the • Halt sourcing from Schweighofer until the company can latest. establish full traceability; Romanian government: • Reassess the Due Diligence policies of major Japanese • Continue prosecution of Schweighofer; expand to other importers in the context of the Clean Wood Act. bad actors, both foreign and domestic; EUTR Competent Authorities: • Expand the Forest Inspector website to provide more • Work together to enforce compliance with EUTR key data to the public; requirements where relevant within all member states. • Significantly strengthen law enforcement against illegal logging and corruption;

15 References 1 Unless otherwise noted, the sources for this report are EIA’s internal 32 http://evz.ro/fratia-topoarelor-milionarul-care-taia-paduri-ca-sa-vaneze- investigative reports, photos and audio and video evidence collected in tigri-si-lei-in-africa.html; https://www.comisarul.ro/politic/imagini-de- Romania in 2017 and 2018. colectie/ponta-un-baron-psd-si-fierastr_456292.html 2 Romanian forest experts consulted by EIA. 33 http://gazetadebistrita.ro/lovitura-traian-larionesi-pierdut-procesul-cu- 3 http://diicot.ro/index.php/arhiva/2384-comunicat-de-presa-30-05-2018 garda-forestiera-si-este-dat-judecata-si-de-cj-ul-lui-radu-moldovan/. 4 http://www.mmediu.ro/app/webroot/uploads/files/2015-07-30_CP_ 34 http://gazetadebistrita.ro/larionesi-nu-respecta-legile-tarii-dovada-amenzi- controale_paduri.pdf; http://www.europafm.ro/ministrul-mediului- de-200-000-lei-doar-in-prima-jumatate-a-anului/. holzindustrie-schweighofer-a-lucrat-cu-firme-fantoma/ 35 https://www.timponline.ro/controale-zonele-exploatare-forestiera-parcul- 5 https://ic.fsc.org/en/news-updates/id/1779 national-calimani-video/. 6 https://www.schweighofer.at/en/responsibility/questions-and-answers.html 36 https://www1.agerpres.ro/comunicate/2018/04/29/comunicat-de-presa- 7 http://www.inspectorulpadurii.ro igpr-10-56-49. 8 http://diicot.ro/index.php/arhiva/2384-comunicat-de-presa-30-05-2018 37 http://propolitica.ro/controalele-de-astazi-la-sc-stargate-ilva-mica-firma-din- 9 https://www.schweighofer.at/en/responsibility/questions-and-answers.html cadul-grupului-frasinul-nu-au-gasit-nimic-ilegal/; http://www.ziarul-bn.ro/ 10 http://www.greenpeace.org/romania/ro/campanii/paduri/Activitati/ catalin-tobescu-condamna-controalele-la-firmele-lui-traian-larionesi-i-emil- inspectorul-padurii-taiat/ iugan-ac-iune-de-intimid. 11 https://www.schweighofer.at/no_cache/en/press/news/detail/ 38 OUG nr. 57/2007 privind regimul ariilor naturale protejate, conservarea schweighofer-group-quits-its-romanian-forest-investments.html habitatelor naturale, a florei şi faunei sălbatice 12 Romanian forest experts consulted by EIA. 39 Ibid. 13 https://www.schweighofer-initiative.org/en/timber-coming-mills-legal- 40 http://silvic.usv.ro/cursuri/silvotehnica_id.pdf origin/ 41 https://eia-global.org/reports/2017-illegal-logging-in-rodna-mountains 14 https://www.schweighofer.at/en/responsibility/measures.html 42 Ibid. 15 http://ec.europa.eu/environment/forests/timber_regulation.htm 43 http://diicot.ro/index.php/arhiva/2384-comunicat-de-presa-30-05-2018 16 http://wwf.panda.org/homepage.cfm?19306/Illegal-logging-in-Romania-a- 44 https://www.romania-insider.com/competition-council-investigation-timber- WWF-analysis market/ 17 HOTĂRÂRE nr. 470/2014 din 4 iunie 2014 pentru aprobarea Normelor 45 https://www.schweighofer.at/fileadmin/files/all_de/ referitoare la provenienţa, circulaţia şi comercializarea materialelor Pressemitteilungen/170404_Eighth_EUTR_control_with_positive_results. lemnoase, pdf 18 Ibid. 46 http://diicot.ro/index.php/arhiva/2384-comunicat-de-presa-30-05-2018 19 https://content.eia-global.org/posts/documents/000/000/319/original/ 47 http://www.schweighofer-initiative.org/en/declaratie-de-presa/#post-2647 Stealing_the_Last_Forest.pdf?1468592842 48 HOTĂRÂRE nr. 470/2014 din 4 iunie 2014 pentru aprobarea Normelor 20 https://ic.fsc.org/file-download.public-version-of-the-complaints-panel- referitoare la provenienţa, circulaţia şi comercializarea materialelor evaluation-report-oct-2016.6426.htm lemnoase 21 Holzindustrie Schweighofer, “Fact Check: EIA’s ‘Depot Deception’ video.” 49 http://www.kronospan-worldwide.com/environment/ January 3, 2017. 50 OUG nr. 57/2007 privind regimul ariilor naturale protejate, conservarea 22 https://www.schweighofer.at/no_cache/en/press/news/detail/ habitatelor naturale, a florei şi faunei sălbatice schweighofer-group-quits-its-romanian-forest-investments.html 51 http://natura2000.eea.europa.eu/ 23 https://www.schweighofer.at/no_cache/en/press/news/detail/ 52 http://www.kronospan-worldwide.com/environment/ holzindustrie-schweighofer-action-plan-for-sustainable-timber-industry-in- 53 https://www.egger.com/downloads/cms/1_37654_BR_Environment_ romania-successfully-impl.html Sustainability_EN.pdf 24 https://www.schweighofer.at/en/responsibility.html 54 https://www.egger.com/get_download/7d7c7748-1272-45e8-93b7- 25 https://www.schweighofer.at/fileadmin/files/all_en/Press/170425_Timflow_ f73a1c07ba30/Manufacturer_declaration_Timber_origin.pdf. GPS_tracking_system_well_on_track.pdf 55 https://eia-global.org/press-releases/japanese-buyers-fueling-illegal- 26 https://www.schweighofer.at/en/forestry/forestry.html (since removed) logging-in-romanias-last-ancient-forests 27 https://content.eia-global.org/posts/documents/000/000/319/original/ 56 https://forestlegality.org/blog/japan%E2%80%99s-new-legal-timber-law Stealing_the_Last_Forest.pdf?1468592842 57 http://www.rinya.maff.go.jp/j/riyou/goho/english/pdf/01essence-aop. 28 https://www.riseproject.ro/articol/reteaua-schweighofer-cine-a-taiat-si-cat- 58 https://eia-global.org/press-releases/japanese-buyers-fueling-illegal- a-castigat/; http://gazetadebistrita.ro/traian-larionesi-la-al-treilea-dosar- logging-in-romanias-last-ancient-forests penal-a-ramas-fara-arme-si-permis-de-vanatoare/ 59 https://www.romania-insider.com/brico-depot-romania-stops-buying- 29 http://citynews.ro/eveniment/de-la-aderarea-la-ue-judetul-bistrita-nasaud- timber-holzindustrie-schweighofer/ absorbit-peste-400-de-milioane-de-euro-din; http://www.nvconstruct. 60 Veen, P., & Biriş, I. (2005). Virgin forests in Romania: Inventory and strategy ro/2011/05/15/modernizarea-si-extinderea-infrastructurii-forestiere-in- for sustainable management and protection of virgin forests in Romania. comuna-salva-judetul-bistrita-nasaud/. ICAS and KNNV. Bucharest. 30 https://adevarul.ro/locale/bistrita/ce-firme-judet-si-au-cumparat-protectia- 61 Romanian forest experts consulted by EIA capilor-politiei-bistritene-materiale-constructii-bere-diverse-lucrari- 1_5475e8afa0eb96501e1b27e0/index.html; 31 http://gazetadebistrita.ro/traian-larionesi-este-dumnezeul-judetului-muta- si-schimba-politistii-ce-il-deranjau/ EIA - WASHINGTON, DC P.O. Box 53343, Washington, DC 20009, USA TEL +1 202 483 6621 FAX: +1 202 986 8626 EMAIL: [email protected] WWW.EIA-GLOBAL.ORG

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